DCIT, New Delhi V. M/s Power Crid Corporation of India Ltd., New Delhi

ITA 3738/DEL/2013

• Counselvise Citation: 373820114 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 11-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 11-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: V M CHAURASIA
• Keywords: Reopening of assessment; Audit objection; Revised return
• Section: 143(3); 115JB; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI G.D. AGRAWAL , VICE PRESIDENT AND SHRI I.C. SUDHIR , JUDICIAL MEMBER ITA NO. 3738 /DEL / 2013 ASSESSMENT YEAR: 2004 - 05 DY. COMMISSIONER OF INCOME VS. M/S POWER GRID CORPORATION TAX, CIRCLE - 14(1), NEW DELHI OF INDIA LTD. , B - 9, QUTUB INSTITUTIONAL AREA, KATWARIA SARAI, NEW DELHI - 110016 (PAN: AAACP0252G) (APPELLANT) (RESPONDENT) WITH C .O. NO. 302/DEL/2014 (ARISING OUT OF ITA NO . 3738/DEL/2013 ) ASSESSMENT YEAR: 2004 - 05 M/S POWER GRID CORPORATION VS. DY. COMMISSIONER OF INCOME O F INDIA LTD, B - 9, QUTUB TAX, CIRCLE - 14(1), NEW DELHI INSTITUTIONS AREA, KATWARIA SARAI, NEW DELHI - 110016 (PAN:AAACP0252G) ASSESSEE BY : SH. V.M. CHAURASIA, ADV. DEPARTMENT BY: SH. VIKRAM SAHAY, SR. DR. ORDER PER SHRI I.C. SUDHIR, JM : 1. THE REVENUE HAS QUESTIONED THE ACTION OF THE LEARNED CIT(A) IN DELETING THE ADDITIONS MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR LEVY ENCASHMENT , EX - GRATIA AND CAPITAL WORK IN PROGRESS, ACCRUED INTEREST ON DEPOSITS WITH CANFINA AND DISALLOWANCE OF LOSS DUE TO CHANGE IN ACCOUNTING POLICY. 2. THE ASSESSEE, ON THE OTHER HAND, OBJECTED THE ACTION OF THE LEARNED CIT(A) IN NO T DISPOSING OF GROUND NO. 2 RAISED BEFORE HIM QUESTIONING THE 2 ITA NO. 3738/DEL /2013 & C.O. NO 302/DEL/2014 VALIDITY OF REOPENING OF ASSESSMENT UNDER SECTION 148 OF INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) ON ITS MERIT. 3. SINCE THE ISSUE RAISED IN THE CROSS OBJECTION PREFERRED BY THE ASSESSEE IS LEGAL IN NATURE AND GOES TO THE ROOT OF THE MATTER, WE PREFER RED TO DISPOSE IT FIRST. 4. LEARNED AR SUBMITTED THAT IN RESPONSE TO THE NOTICE S ISSUED UNDER SECTION S 148 OF THE ACT AND SECTION 143(2) AND O THERS THE ASSESSEE HAD QUESTIONED THE VALIDITY OF REOPENING PROCEEDINGS AS TIME BARRED. IT WAS CONTENDED THAT THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AFTER TRUE DISCLOSURE OF FULL FACTS BY THE ASSESSEE AND NO NEW FACTS HAS COM E ON RECORD. HENCE , PROCEEDING INITIATED UNDER SECTION 147 OF THE ACT AFTER FOUR YEARS FROM THE END OF RELEVANT YEAR IS TIME BARRED. THE A.O. DID NOT AGREE WITH THE ASSESSEE AND DECIDED THE ISSUE AGAINST THE ASSESSEE. HE ALSO MADE SEVERAL ADDITIONS. THE AG GRIEVED ASSESSEE , BESIDES QUESTIONING THE VALIDITY OF ADDITIONS MADE BY THE A.O. HAD ALSO RAISED GROUND ON THE ISSUE OF VALIDITY OF INITIATION OF RE - ASSESSMENT PROCEEDINGS BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) HAS, HOWEVER, PREFERRED TO DECIDE THE APPEAL ON THE ISSUE OF VALIDITY OF ADDITIONS MADE BY THE A.O. IN FAVOUR OF THE ASSESSEE AND IN VIEW THEREOF HE DID NOT WISH TO DECIDE THE VALIDITY OF INITIATION OF REOPENING PROCEEDINGS UNDER SECTION 147 OF THE ACT RAISED BY THE ASSESSEE VIDE GROUND NO. 2 OF THE FIRST APPEAL. LEARNED AR SUBMITTED THAT NO NEW MATERIAL HAS BEEN BROUGHT ON RECORD. THE AUDIT REPORT AND TAX AUDIT REPORT WERE ALREADY ON RECORD FROM WHICH THE 3 ITA NO. 3738/DEL /2013 & C.O. NO 302/DEL/2014 INFORMATION WAS EXTRACTED BY THE A.O. FOR INITIATION OF REOPENING PROCEEDINGS. THUS, TH ERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO FULLY DISCLOSE ALL NECESSARY FACTS DURING THE ORIGINAL ASSESSMENT. IN SUPPORT HE PLACED RELIANCE ON THE FOLLOWING DECISIONS I. CIT VS. KELVINATOR OF INDIA. LTD., (2002) ITR 1 (DEL. HC) (FB), CONFIRMED BY THE HON BLE SUPREME COURT REPORTED IN 302 ITR 561 (SC). II. IPCA LABORATORIES LTD. VS. GAJANAND MEENA, DCIT, (2001) 251 ITR 416 (BOM.). 5. THE LEARNED AR SUBMITTED FURTHER THAT THE REOPENING HAS BEEN INITIATED ON THE BASIS OF AUDIT OBJECTION HENCE IT IS NOT MAINTAINABLE ON THIS GROUND AS WELL. IN SUPPORT HE CITED THE FOLLOWING DECISIONS: I. INDIAN AND EASTERN NEWSPAPER SOCIETY VS. CIT, 1979 ( 8 ) TMI 1 (SC) II. XEROX MODICORP LTD. VS. DCIT, 2013 (1) TMI 160 (DEL) . 6. LEARNED DR, ON THE OTHER HAND, TRIED TO JUSTIFY THE ASSESSMENT ORDER. 7. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT BY VIRTUE OF PROVISO TO SECTION 147 OF THE ACT , NO ACTION CAN BE TAKEN FOR REOPENING AFTER FOUR YEARS UNLESS THE ASSESSING OFFICER HAS REASON TO BELIEF THAT INCOME HA S ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. WITHOUT EXAMINING THE ABOVE PRE - CONDITION FOR THE ISSUE OF A VALID NOTICE UNDER SECTION 148 OF THE ACT IN THE PRESENT CASE, THE LEARNED CIT(A) HAS PREFERRED TO REJECT GROUND NO. 2 RAISED BEFORE HIM IN THIS REGARD ON THE BASIS THAT HE HAS DECIDED THE APPEAL BY DELETING DISALLOWANCE/ADDITIONS MADE BY THE A.O. IT IS PREVAILING PRACTICE IN 4 ITA NO. 3738/DEL /2013 & C.O. NO 302/DEL/2014 DISPOSAL OF AN APPEAL THAT WHERE AN ACTION HAS BEEN QUESTIONED ON ITS LEGALITY AND ON ITS MERIT, THE LEGAL ISSUE QUESTIONING THE VALIDITY OF THE ACTION IS ADJUDICATED FIRST AS IT GOES TO THE ROOT OF THE MATTER. IN THE PRESENT CASE BEFORE US, THE LEARNED CIT(A) HAS INSTEAD PREFERRED TO DECIDE THE VALIDITY OF DISALLOWANCE/ADDITIONS MADE BY THE A.O. FIRST AND THAT THE ISSUE OF VALIDITY OF THE ASSESSMENT AS TIME BARRED IN VIEW OF THE PROVISO TO SECTION 147 OF THE ACT RAISED IN GROUND NO. 2 BEFORE HIM HAS BEEN LEFT UNADJUDICATED. WE THUS, IN THE INTEREST OF JUSTICE , SET ASIDE THE MATTER TO THE FILE OF LEARNED CIT(A) TO DECIDE THE ISSUE RAI SED IN GROUND NO. 2 BEFORE HIM O N ITS MERIT AFTER VERIFYING THE FACTS IN ORDER TO ASCERTAIN WHETHER THE PRE - CONDITION FOR THE ISSUE OF A VALID NOTICE UNDER SECTION 148 OF THE ACT HAS BEEN FULFILLED BY THE A.O. OR NOT. WHILE DECIDING THE ISSUE THE LEARNED CIT(A) WILL AFFORD ADEQUATE OPPO RTUNITY OF BEING HEARD TO THE PARTIES. THE OBJECTION RAISED IN THE CROSS OBJECTION PREFERRED BY THE ASSESSEE IS THUS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSES. ITA N O . 3738/DEL/2013 9. THE REVE NUE HAS QUESTIONED THE FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: I. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS. 25,53,00,000/ - PROVISION FOR LEAVE ENCASHMENT, EX - GRATIA AND CAPITAL WORK IN PROGRESS; II. T HE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION ON ACCOUNT OF ACCRUED INTEREST OF RS. 9,39,00,000/ - ON DEPOSITS WITH CANFINA NOT ACCOUNTED IN PROFIT AND LOSS ACCOUNT WITH APPRECIATING THE FACT THAT BOOKS OF ACCOUNT ARE BEING MAINTAINED ON 5 ITA NO. 3738/DEL /2013 & C.O. NO 302/DEL/2014 MERCANTILE BASIS AND IT MUST BOOK ALL THE INCOME WHICH ACCRUE DURING THE RELEVANT ACCOUNT YEAR; III. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF LOSS RS. 4,17,00,000/ - DUE TO CHANGE IN ACCOUNT POL ICY APPRECIATING THE FACT THE DETAILED REASON GIVEN BY THE A.O. IN ASSESSMENT ORDER. 10. THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING AND IS TRANSMITTING POWER FROM GENERATING UNITS TO STATE ELECTRICITY BOARDS (SEBS). IT EARNS ITS INCOME FROM TRANSMISSION OF ELECTRICITY. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS FILED ON 29.10.2002 AT THE LOSS OF RS. 11,69,22,17,070/ - AND AT A BOOK PROFIT OF RS. 3,48,19,46,800/ - . SUBSEQUENTLY A REVISED RETURN WAS FILED ON 28.03.2006 REDUCING THE LOS S TO RS. 11,87,71,144/ - . THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 29.11.2006 AND A LOSS WAS DETERMINED AT RS. 9,30,21,47,140/ - AND BOO K S PROFIT OF RS. 6,05,69,26,800/ - . THE ASSESSMENT WAS REOPENED ON 25.03.2011 AS IT WAS FOUND THAT RS. 39.09 CR ORES HA D ESCAPED ASSESSMENT. THE REASSESSMENT WAS COMPLETED ON 22.12.2011 AND THE LOSS WAS DETERMINED AT RS. 9,63,02,57,140/ - . THE A.O. DISALLOWED PROVISION FOR OTHERS AMOUNTING TO RS. 25,53,00,000/ - , THE EXPENSES ON ACCOUNT OF CHANGE IN ACCOUNT POLICY OF R S. 4,17,00,000/ - AND ALSO ADDED BACK ACCRUED INTEREST INCOME OF CANFINA OF RS. 9,39,00,000/ - . THE A.O. ALSO MADE SIMILAR ADDITION TO THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE LEARNED CIT(APPEALS) HAS DELETED THE ADDITION BY PASSING A DETAILED OR DER. 6 ITA NO. 3738/DEL /2013 & C.O. NO 302/DEL/2014 11. SINCE WE HAVE SET ASIDE THE MATTER TO THE FILE OF THE LEARNED CIT(APPEALS) TO DECIDE THE ISSUE OF VALIDITY OF REASSESSMENT RAISED IN THE CROSS OBJECTION, WHICH GOES TO THE VERY ROOT OF THE MATTER, WE FIND IT PROPER TO SET ASIDE THIS ISSUE RAISED IN THE ABOVE GROUNDS AS WELL WITH THIS CONDITION THAT IF HE DECIDES THE VALIDITY OF REASSESSMENT IN FAVOUR OF THE REVENUE THEN RECONSIDER THE GRIEVANCE OF THE REVENUE RAISED IN THE GROUNDS OF APPEAL PREFERRED BY THE REVENUE BEFORE US AFTER AFFORDING OPPORTUN ITY OF BEING HEARD TO THE PARTIES. THE GROUNDS ARE THUS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 13. IN SUMMARY, THE CROSS OBJECTION PREFERRED BY THE ASSESSEE AND APPEAL BY THE REVE NUE ARE ALLOWED FOR STATISTICAL PURPOSES. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2015. SD/ - SD/ - (G.D. AGRAWAL ) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED: 30 TH JANUARY, 2015. *MOHAN LAL* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI